Indiana debtors who have accrued hefty debt do so in many ways. There could be medical expenses, job loss and using credit cards to cover for lost wages, and mistakes in spending. Student loans are a major problem across the nation and, despite these debts generally being ineligible for dismissal or reduction through bankruptcy, that has not stopped people who are dealing with it to file anyway. This might seem to be a useless endeavor as the main idea behind bankruptcy is to clear debt, but it can be a strategic way to free up money to pay down the student loans. A recent study shows just how prevalent Chapter 7 bankruptcy has become for student loan debtors.
LendEDU found that of all people who are filing for Chapter 7, 32% had student loan debt. Nearly half of their debt was based on student loans. Since the amount owed by people across the U.S. has reached $1.5 trillion, the problem is getting worse with no end in sight. Students who graduated in 2018 had nearly $30,000 in student loans to pay back. People who are just entering the workforce after college and other forms of schooling with this level of debt places them in an immediate hole. The recession and cost of living makes it nearly impossible for most people to get the debt down quickly.
In the study, there were nearly 1,100 people whose bankruptcy cases were analyzed. Chapter 7 is a form of personal bankruptcy in which the person's property - if there is any of value - is liquidated. They will subsequently have the debts discharged and no longer need to pay them. Included are consumer debts like credit cards. The perceived disconnect between not being allowed to discharge student loans and filing for Chapter 7 can be explained by these individuals using money they saved from not paying credit cards and other consumer payments to try to whittle down student loan payments.
Being in overwhelming debt can make people feel as if there is no way out. This is especially true if it is student loan debt and they have been repeatedly told they have no alternative but to pay it. Considering Chapter 7 is a way to eliminate other debt to pay down the student loan. Regardless of the circumstances, considering strategies to eliminate debt - no matter where it came from - is an integral part of debt relief. A law firm that helps people with their debts should be called for advice on whether this is a sound strategy and if there are other options.